Compare and contrast financial and management accounting practices deployed within tourism and hospitality organisations
To begin with, management accounting helps in providing information to people within the restaurant or ‘internal parties’ such as managers and directors of the restaurant and helps them take better decisions and increase efficiency and effectiveness of the existing operations. On the other hand, financial accounting practices are helpful in providing information to people outside the restaurant or ‘external parties’ such as shareholders, creditors, tax authorities, regulators and potential investors amongst others. On this basis, the management accounting practices within the tourism and hospitality organisations are referred to as ‘internal reporting’ while financial reporting practices are referred to as ‘external reporting’.
In addition, it is a statutory requirement for public limited restaurateur organizations to produce annual financial accounts irrespective of whether the organization’s management regards this information as useful or not. On the other hand, Management accounting practices are not considered as a compulsory exercise and therefore this information should be produced only if the benefits associated with the use of this information by the management exceeds the cost of collecting it.
Another distinction between these practices is that while financial accounting practices describe the whole of the business of the restaurant, the management accounting practices focus on smaller elements of the restaurant business such as expenses and revenues from products, services, customers and other activities. Additionally, management accounting practices measure the economic performance of the various departments of the restaurant as opposed to the whole of it.
Besides, financial accounting practices generally follow legally prescribed structures and principles that are prepared by the Financial Accounting Standards Board (FASB) of the United States or the Accounting Standards Board (ASB) in the United Kingdom. This is intended to ensure the achievement of uniformity and consistency required for external financial statements so that comparisons within the company and with the historical data can be made easily. On the other hand, management accounting practices have no compliance with the generally accepted accounting principles while providing managerial information for internal purposes. Their use is specific towards managerial internal decision making and internal improvement.